If you produce average cattle, you're missing all the premiums. Aim higher, for the good of the beef industry and your own financial future. If you produce high quality cattle, but sell them as a commodity, you're still missing all the premiums. You deserve better for helping improve consumer demand for beef.
There are many ways to ally with premium quality and get paid for it. Most involve networking with at least one other producer who has similar quality objectives. You could start by talking to feedlot operators, cattle buyers and breed association representatives. Decide on a primary breed influence and a primary end-product target based on well-established premiums and risk of discounts.
Choose primary partners among registered seedstock producers and quality-focused feedlots (unless you plan to feed on your own). Some seedstock producers offer a higher level of service compared to those who merely sell bulls. That's not to say a seedstock partner must be very large, but his commitment to quality must be.
Seedstock suppliers may be interested in expansion, and that could spell opportunity for you. It may come in the form of a cooperative agreement to provide recipient cows for an embryo transfer program, to participate in joint ownership or provide custom care for cattle. After a few years, these joint ventures could lead to a full partnership producing and marketing premium quality registered cattle.
If you want to stay in the commercial world, there are still many opportunities connected to seedstock producers. Some suppliers offer “buy-back” programs at a premium to local calf markets, or share ownership with you after weaning and placement at a cooperating feedlot. In many cases, these arrangements include feedlot performance and individual carcass data on which to base future selection and management decisions.
Seedstock suppliers with enough volume may offer special calf sales where only progeny of their bulls are offered. These can generate premiums at the calf level, but may not always offer a way to gain carcass data to justify future premiums in any market.
You can approach partnering from the feedlot end as well. Find a quality-focused feeder with a reputation for making money for his customers and ask about favored genetics and seedstock suppliers. There are advantages to fitting into a fully integrated plan from conception to the finished beef target.
Feedlots are developing alliances every day that seek to assure their future by aligning with quality-minded producers. If you fit the mindset, look into the benefits. With their access to commercial investors, some feedlots offer great flexibility in the degree of retained ownership—from next to nothing to 100%—required for carcass performance and value data.
Your feedlot partner can handle the details, but you still need to know about value-based “grid marketing” for consumer targets, to understand the value differences. Branded beef companies and strategic alliances with those brands are the main producer connections, with contacts detailed annually in several national magazines.
Some grids reward handsomely for high quality, but discount unmercifully for failure to make at least the Select grade. Other grids are more balanced in rewarding both quality and red-meat yield, and are less forgiving of excess fat. Recent grid price trends show a widening of the spread between Select and higher marbling quality, and an increase in premiums for Yield Grades 1 and 2.
Base prices for grids vary from previous week's cash price to the nearby futures month or locally negotiated. That base usually starts with Select, Yield Grade 3, but may start with Choice, Yield Grade 3—either can work to your advantage, depending on the bid and your cattle—but be sure you know the starting grade.
Niche markets may also have grids, unique to program preferences. Make sure any extra steps required for eligibility are covered in the rewards, and that there are other viable marketing avenues open if your cattle fail to qualify for a given program.
In light of the complexity of grid marketing, especially with first-time cattle, many beginning feeders opt for cash sales with carcass data, an increasingly common option. For as little as $2/head, some feedlots can obtain individual carcass data even on cash live sales.
Individual data will allow “what if” comparisons among the grid markets, useful for future selection, management and marketing decisions. Your cattle type may be split between two major targets, say high quality and high yield grade. If the data conform to patterns in your cowherd or breeding decisions, you can aim the next calf crop at the proper grid targets while choosing future sires based on the highest priced end product.
In the next edition of Black Ink, we'll look at how to coordinate weaning and health programs with the market in mind. Questions? Call toll-free at 877-241-0717.